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Audit finds issues with Pape Taxi books

The City of New Richmond may try to recover payments made to Pape Taxi Service for service provided in 2005.

The Wisconsin Department of Transportation recently completed an audit of the taxi service's books for 2005, 2006 and 2007.

At a special City Council meeting Monday night, WisDOT auditor Linda Thompson reported that Pape Taxi Service's accounting records for those three years showed numerous expenses charged that are not allowed under state guidelines.

In 2005, the City paid Pape Taxi to provide service to New Richmond residents based on actual expenses incurred for providing taxi rides.

In that year, Thompson claims, the city was over-billed about $38,000.

She questioned vacation pay that was based on employees working 15 hours per day, expenses for two cell phones being charged to the City account, alcoholic beverages charged to a meal purchase, among other items. She also questioned the amount of owner Jason Pape's salary that was charged against the City's account.

Thompson said accounting problems continued over the next two years.

However, the City's contract for taxi service with Pape Taxi for the years 2006 and 2007 was awarded on a set hourly rate not an actual cost basis.

Still, according to the audit, Pape Taxi appeared to shift some of the expenses of New Richmond Transport and other business unrelated to the City contract to the the wrong books.

Thompson said there were no time sheets provided for several Pape Taxi employees who were paid in 2006 and 2007. The documentation is required by the state.

Thompson also claimed that expenses for trash pick-up, utilities, a Sam's Club membership and a new copier were improperly billed to the City contract.

Thompson also questioned the amount of rent shown as an expense for the City contract business.

The auditor said only a portion of the expenses such as utilities and rent should be charged against the City's contracted service, not the full amounts.

She said there were questionable trips to such locations as Illinois, Kentucky and Tennessee that appeared to be claimed as an expense for the contract. Because the service only provides rides for residents within the City limits, she said there was no reason to have gas purchases outside the community.

According to the audit, Pape Taxi recorded about $77,000 in excess expenses on its books for 2006 and about $129,000 in 2007.

Speaking on his own behalf, Jason Pape said he was not given adequate time to respond to the alleged disallowed expenses prior to the final audit report.

While he would agree with some of the items disallowed, others fall within the allowable expense guidelines of the Internal Revenue Service, he claimed.

He claimed the state had previously allowed Pape Taxi to charge vacation pay at the rate of 15 hours per day, "because that's the number of hours we operate."

He also said the lack of time sheets for employees was not an issue because they are salaried positions, and that the money paid accurately reflected the work that was done by employees over the course of the year.

Pape also noted that trash and utility bills are in the wrong name, but are an expense incurred by the City's taxi service.

He said the charge for cell phones was necessary as an emergency communication tool, and that the Sam's Club membership allows the business to buy supplies at a cheaper rate.

Pape said because the 2006-07 contracts were based on a set hourly bid, he didn't expect his accounting records to be audited.

Had he known the record keeping the state would require, Pape said he would have been more careful with his bookkeeping.

Alderman Fred Horne said the contract between Pape and the City requires that "accurate books" be kept.

"It doesn't appear there is very accurate bookkeeping for the taxi service," Horne said.

Pape disagreed, saying his bookkeeper was following IRS regulations in determining what expenses qualified.

"We believe the majority of these things would be covered," Pape answered.

Alderman Jim Johnston disagreed. He said Pape has had adequate time to respond to the auditor's finding and has done nothing to address the issues.

He said when taxpayer money is involved, vendors like Pape Taxi are required to prove that money is being spent the way it's supposed to.

"I'm absolutely dumfounded that this kind of record keeping is here," Johnston said. "I don't understand how this could happen."

At the end of the meeting, Alderman Fred Horne said he didn't think it was possible for the City to recover monies paid for 2006 and 2007 services, despite the accounting issues. Those contracts were based on bids and the City paid the actual bid price.

But the Council referred the issue of the alleged 2005 overcharges to its Finance Committee for possible action.

City Clerk Joe Bjelland suggested that when the next contract for taxi service is signed that state auditors, City officials and the winning taxi service contractor sit down to go over the rules for allowable expenses and bookkeeping requirements.

That way, he said, there will not continue to be disputes over billing and other issues.